| Investors are valuing Germany's 30-share Dax index more favourably than ever. Almost every trading day in the first half of February it reached a new all-time high until it broke through the 3200-barrier on February 12. The environment for further price gains has steadily improved. One reason is that bond yields are at historic lows. Falling bond yields and a steep curve have been fuelling the equity market for almost two years now. But euphoria explains just as much as the technical factors. Jörg-Peter Lühmann, a board member at German fund manager Deka, describes various elements as providing optimism in the equity markets: "The shareholder value movement, new cashflow calculations and the need for Germans to invest long-term in private pension schemes at the very least, each of these provides a reason for the equities market to remain stable." Presumably local institutional investors will be driven to invest substantially in the equities market by the need to deliver better returns. Most German insurers still invest far less than the possible 30% of their portfolios in the equities market. Deka provides an insight into the potential demand for German equities. |